Let the rant begin:
I think it’s an absurd idea that things like labor are taxed at all (via income taxes), when labor is a productive activity. Meanwhile there are so many unproductive or outright harmful activities that don’t get taxed nearly enough! Land speculation, carbon emissions, other forms of pollution, monopolistic control of finite natural resources, etc.
Further, even from a solely economic point of view, taxing things discourages them and distorts the market. Taxing carbon is a known way to reduce carbon emissions. Why don’t we choose to distort the things we want to be distorted anyways, like pollution and rent-seeking behaviors?
Further, there is ample evidence to suggest we genuinely don’t need income taxes to fully fund our government. I (and many others) are in favor of 3 main types of taxes:
- Land value taxes
- Pigouvian (or externality) taxes
- Severance taxes
Land Value Taxes
A land value tax (LVT) is a levy on the value of land without regard to buildings, personal property and other improvements.[1] It is also known as a location value tax, a point valuation tax, a site valuation tax, split rate tax, or a site-value rating.
Land value taxes are generally favored by economists as they do not cause economic inefficiency, and reduce inequality.[2] A land value tax is a progressive tax, in that the tax burden falls on land owners, because land ownership is correlated with wealth and income.[3][4] The land value tax has been referred to as “the perfect tax” and the economic efficiency of a land value tax has been accepted since the eighteenth century.[1][5][6] Economists since Adam Smith and David Ricardo have advocated this tax because it does not hurt economic activity, and encourages development without subsidies.
LVT is associated with Henry George, whose ideology became known as Georgism. George argued that taxing the land value is most logical source of public revenue because the supply of land is fixed and because public infrastructure improvements would be reflected in (and thus paid for by) increased land values.[7]
https://en.wikipedia.org/wiki/Land_value_tax
In 1977, [Nobel prize-winning economist] Joseph Stiglitz showed that under certain conditions, beneficial investments in public goods will increase aggregate land rents by at least as much as the investments’ cost.[1] This proposition was dubbed the “Henry George theorem”, as it characterizes a situation where Henry George’s ‘single tax’ on land values, is not only efficient, it is also the only tax necessary to finance public expenditures.[2] Henry George had famously advocated for the replacement of all other taxes with a land value tax, arguing that as the location value of land was improved by public works, its economic rent was the most logical source of public revenue.[3]
Subsequent studies generalized the principle and found that the theorem holds even after relaxing assumptions.[4] Studies indicate that even existing land prices, which are depressed due to the existing burden of taxation on labor and investment, are great enough to replace taxes at all levels of government.[5][6][7]
Pigouvian Taxes
A Pigouvian tax (also spelled Pigovian tax) is a tax on any market activity that generates negative externalities (i.e., external costs incurred by the producer that are not included in the market price). The tax is normally set by the government to correct an undesirable or inefficient market outcome (a market failure) and does so by being set equal to the external marginal cost of the negative externalities. In the presence of negative externalities, social cost includes private cost and external cost caused by negative externalities. This means the social cost of a market activity is not covered by the private cost of the activity. In such a case, the market outcome is not efficient and may lead to over-consumption of the product.[1] Often-cited examples of negative externalities are environmental pollution and increased public healthcare costs associated with tobacco and sugary drink consumption.[2]
https://en.wikipedia.org/wiki/Pigouvian_tax
A carbon tax offers the most cost-effective lever to reduce carbon emissions at the scale and speed that is necessary. By correcting a well-known market failure, a carbon tax will send a powerful price signal that harnesses the invisible hand of the marketplace to steer economic actors towards a low-carbon future.
https://archive.is/TYVWT#selection-2043.3-2043.318
Severance Taxes
Severance taxes are taxes imposed on the removal of natural resources within a taxing jurisdiction. Severance taxes are most commonly imposed in oil producing states within the United States. Resources that typically incur severance taxes when extracted include oil, natural gas, coal, uranium, and timber. Some jurisdictions use other terms like gross production tax.
https://en.wikipedia.org/wiki/Severance_tax
The key to Norway’s success in oil exploitation has been the special regime of ownership rights which apply to extraction: the severance tax takes most of those rents, meaning that the people of Norway are the primary beneficiaries of the country’s petroleum wealth. Instead of privatizing the resource rents provided by access to oil, companies make their returns off of the extraction and transportation of the oil, incentivizing them to develop the most efficient technologies and processes rather than simply collecting the resource rents. Exploration and development is subsidized by the Norwegian government in order to maximize the amount of resource rents that can be taxed by the state, while also promoting a highly competitive environment free of the corruption and stagnation that afflicts state-controlled oil companies.
https://progressandpoverty.substack.com/p/norways-sovereign-wealth-fund
Inequality
Specifically, I suggest that much of the increase in inequality is associated with the growth in rents — including land and exploitation rents (e.g., arising from monopoly power and political influence).
https://academiccommons.columbia.edu/doi/10.7916/d8-t92w-f529
You can actually kind of tax these kind of capital investments, because there is a difference between the Apple Inc. shares I buy from you vs the shares I buy directly from Apple Inc. The shares I buy from you, are just called ‘shares’ whereas the shares I buy from the company are ‘issued shares’, which basically means that the shares are recently ‘issued’ (aka being made available to the public). Could a tax agency track who buys which shares and what type of share they are? Yes, with enough resources and manpower, definitely. The Dutch tax agency already taxes investments and they could probably track whether you’ve bought an issued share or a normal share (or a preference share). The tax agency could decide to tax transactions of ordinary shares, but grant exemptions to issued shares, because the issued shares actually contribute to the economy. Though this does lead to a loophole where someone could just set up their own small LLC, start an IPO, invest all their personal wealth and buy stocks, and then just request a tax exemption for this (similar to how people set up their own non-profits and donate to that). And about your point of the asymmetric information: Yes, that’s true, the company could lie about their productivity and/or future plans, but that’s the risk about investing, and it doesn’t only apply to new startups, but also to established corporations. The risk can’t be eliminated, and it’s just a thing that’s part of investing.
Well yeah, this makes sense, because your wage is based on how hard it is to replace you, not about how much you contribute to society or how good you are at your job. Additionally, I think this is the reason why the elite classes in our society usually try and ensure that the labor class is always too poor to actually stand up for themselves; too poor to have a retirement (and stop working), too poor to have fallback options, and too poor to go on strike. Simultaneously, they don’t want the inequality to become big, because otherwise you’ll have a big group of people with nothing to lose, except their (probably) worthless lives. And thus a repeat of the French Revolution in 1789 will occur, where the masses will have had enough of the oppression and take over the country. (This is also what Marx said would happen, with the violent uprising of the proletariat). Anyway, I feel like I’ve completely changed the conversation subject now; from taxes to Marxist class theory.
(Continued in reply)
Yup, we’ve also had it here. It’s kinda funny to see how employers refuse to increase wages, yet complain there aren’t any people willing to work for them.
Oooh, this is interesting. Alright, question: If a car is on autopilot (like the Tesla cars who can drive themselves) kill someone, who’s responsible? The driver, the programmer of the driving software, the company, someone else? Also, how would a car be designed to make it safer for people outside the cars? Put up a bunch of pillows on the sides or… ?
I would suggest a tax on dividend (this would encourage the shareholders to re-invest the money into the company, instead of just giving it away to the shareholders), and a tax on buying non-issued shares (This would discourage investors into buying shares that doesn’t directly benefit the company itself).
Well, I guess this is it. After a couple of long essays, we’ve finally hit a disagreement. I think that this is not a good idea (to put it lightly), because it would discourage innovation and creativity. Furthermore, extremely expensive technology (such as nuclear fusion) would be better funded by private capital / investors than the government. Though the government could definitely fund it (The Netherlands has a government fund called ‘Invest NL’ which basically gives away grants of tens of millions of euros to private companies), it’s too expensive to completely subsidize it. Some technologies cost hundreds of billions of euros to make and research, which would probably result into a situation where the majority of the government budget is giving away grants to research institutions. Instead, allowing private investors to invest into companies, acquire patents and such would allow science to flourish (as there is plenty of money in the private sector). To be clear, I’m not against the government subsidizing R&D, I’m against R&D being completely dependent on government subsidies. Also, some of the most expensive technology is already being funded by the government, such as the EU Chip Act which grants more than 40 billion euros to chip companies.
Then why has nobody ever done this before? I mean, if a random internet stranger such as you can come up with this, then why can’t a government policy maker?
I guess you’re right and I think it’s a bit disappointing that the LVT would displace poor families, yet simultaneously the government could probably fund a free homeless shelter from the LVT revenues I guess. No perfect policy can be made though, as everything has its disadvantages, including the LVT.
I honestly don’t think the bureaucracy is such a big problem, as long as it can be significantly automated so that it doesn’t become a big burden for the tax agency.
I feel like such a tax should be affordable though, at least for the middle class and poor people. So I’m not sure if a monthly tax would be affordable. Instead, I would opt for an annual tax of like 20% or something. I mean, people already pay income taxes of 30 - 40 percent, so 20 percent annually of your land’s value isn’t that much, compared to the usual income taxes IMO.
Additionally, maybe the LVT would be paid based on the total value of all land you own? In this case, there could be an exemption for the first €100k of the value of your land or something, so that poor families don’t have to pay the LVT and that the tax starts at a rate that should be affordable for the people who can afford to buy land worth at least 100k. This can’t be circumvented by buying lots of smaller pieces of land, because the tax would be based on the total value of your all your property combined.
I’m sorry, but what do you mean with this?